#AM_ART_SPLIT#

RMI's pre-budget statement submission

Dear Chancellor,

The Retail Motor Industry Federation is the UK's leading trade association for the industry. Its objective is to promote the views of all who own and/or manage their own businesses. With over 10,000 members, the RMI is the largest organisation representing the retail motor industry in the UK. This letter sets out some of the major concerns felt by our industry that we would like to see addressed in the forthcoming Budget 2006.

The economic and social contribution nationally of small and medium businesses in the UK is widely recognised. Firms are a key source of job creation, enterprise and innovation, and play an important role in the long-term growth of the UK's productivity. Present legislative burdens constrain businesses from fulfilling their true potential. The RMI would like to take this opportunity to express both its concerns and set out some proposals for change.

The present business tax system encourages companies to use debt finance over equity because they obtain tax relief for interest payments but not for dividends. The Government should encourage business owners to keep profits in their business, by allowing relief against income tax for investment in businesses by their proprietors and their families.

Currently tax relief is available on interest paid on business loans when it is charged through the profit and loss account. In the case of small businesses, tax relief is allowed 11 to 30 months after the payment of interest, and any time from 9 to 21 months after the payment. The Business Interest Relief At Source tax relief is allowed at source at the standard rate to assist cash flow for small firms.

Administering various payments and benefits through the payroll causes significant administrative work for small business employers. The administration of payroll taxes remains a very substantial compliance burden for small firms. Employers and their staff spend time dealing with the complexities of the payroll system instead of running and growing their business. The cost of compliance of this system of tax is nearly £300 per annum for small firms. This figure drops significantly for companies who employ in excess of 5000 people.

The number of benefits administered by employers must be reduced.

Reform of National Insurance is essential and must be made simpler for businesses. The rules governing NI are complex, along with pay-as-you-earn, it accounts for 40 per cent of total payroll compliance costs for firms.

Responsibility for the administration of statutory maternity, paternity and adoption pay should be transferred to the Inland Revenue.

The National Minimum Wage increases above the rate of inflation are now starting to adversely impact on employers. The majority of businesses are still able to operate profitably, but the yearly above-inflation increases have the potential to cause financial problems for small businesses. Future increases in the National Minimum Wage must not be above the rate of inflation. The minimum wage must also reflect the overall national economic situation and allow companies to remain viable particularly in the forecast of an economic turndown.

The capital allowance for expenditure on plant and machinery is an essential incentive for businesses to grow and invest. The Government must continue to support these incentive structures for businesses. The 50% 'First Year Allowances' - capital allowances for small businesses should be extended or made permanent and the 100% capital allowances for small firms' investment in computing equipment which stopped in April 2004, be revised and made permanent.

Current and forecast road congestion is a serious constraint on business, with transport failings costing the economy £15bn annually. Motorways are the most important safest trade routes carrying a fifth of all road traffic. Some sections of these trade routes are severely congested. The key routes that need to be expanded include the M1, M4, M25, M6 and M62 and M6 Toll. At least £4.2bn should be made available for new road capacity over the next three years.

The pressure on businesses remains intense following the huge price rises in fuel in the past year. It remains clear that they will remain high for the foreseeable future. Any further rises in fuel tax would be appalling for business and it would place UK firms at a further competitive disadvantage.

The burden of red tape on our 10,000 Retail Motor Industry Federation members is extremely onerous. On behalf of Public & Limited Companies we fully support a review of the details that must be included in 'Operating & Financial Reviews'. Furthermore the 'gold-plating' of EU Directives only reduces the competitiveness of UK businesses. We urge the government to focus on EU Directives in a less restrictive manner and to take a pro-active approach to reducing the burden of regulation on UK businesses.

If you would like to discuss these issues further I would be delighted to do so.

Yours sincerely,

Matthew Carrington
Chief executive